General Electric cuts company Medicare plans for 130,000 former hourly workers, spouses

LOUISVILLE, Ky. (WDRB) -- General Electric Co. will no longer provide supplemental Medicare plans to about 130,000 former hourly workers and their spouses across the country -- the latest in a series of moves aimed at cutting the company’s expenses for retiree benefits.

Instead, the former workers will shop for individual coverage on a private health insurance exchange, and GE will pay up to $1,000 toward their premiums and medical expenses.

GE notified retirees of the change – which takes effect Jan. 1, 2016 – in a letter dated July 20.

Wayne Gunnell, who worked 36 years at GE’s Appliance Park in Louisville, fears he and his wife will be saddled with costlier insurance next year.

“When I retired from GE, we were led to believe these benefits would be there for us for the rest our life and for our spouses,” Gunnell, 67, said in an interview Tuesday at his home in Eminence, Ky. “Now we’re hearing the rest of the story.”

GE cut the supplemental Medicare plans for former salaried workers last year, prompting a lawsuit that remains pending in federal court in Wisconsin.

Now former hourly workers like Gunnell are getting the same deal as their salaried counterparts.

Instead of GE’s company-sponsored plans – which help cover doctor, hospital and prescription costs that Medicare doesn’t pay – the retirees will get access to a service called OneExchange where they can choose from a number plans offered by several insurers.

GE will provide a “Medicare Reimbursement Account” of $1,000 per person, per year through the exchange toward premiums and “eligible medical expenses,” according to the July 20 letter to retirees.

Through moves like cutting retiree healthcare plans and phasing out defined-benefit pensions, GE plans to shave $15 billion in retiree liabilities by 2019, when the company will still be on the hook for $75 billion in pension and healthcare costs, according to GE’s latest annual report to investors.

“GE has a significant liability for post-retirement benefits, and we need to strike a balance between our obligations to retired employees and to our shareholders,” said GE spokesman Seth Martin.

The OneExchange platform is owned by Towers Watson, a human resources consulting firm that advises GE.

In a regulatory filing, Towers Watson said it offers employers a way to eliminate the “uncertain annual costs” associated with sponsoring retiree healthcare plans by “transition(ing) their retirees to individual, defined contribution health plans at an annual cost that the employer controls.”

This approach gives retirees “the same or better health care benefits as in the past, but at a lower overall cost” to their former employers, the company said.

Martin said GE’s move is “consistent with trends among large companies” – many of whom have done away with retiree healthcare plans in recent years.

Since millions of retirees purchase coverage directly from insurers, the former GE workers will have access to “a wide range of coverage options no single company can match (not even GE),” according to the July 20 letter to retirees.

“This means that many retirees will be able to find more suitable coverage,” GE says in the letter.

Among the former salaried workers, more than 41,000 retirees and their spouses had signed up for 1,335 unique plans from 98 separate insurers and providers less than two months into the enrollment period last fall, a GE official said in a December 2014 filing for the Wisconsin court case.

But Gunnell – who said he suffered a “major stroke” and spent a month in a hospital last year – worries his medical history will make his coverage more expensive. He suspects most retirees will be worse off after the change.

“My dad always told me if it looks like a lemon, and it smells like a lemon, it -- more or less -- is a lemon, and that’s what I feel like we’ve got to deal with now,” he said. With the $1,000 reimbursement, “We’re just scratching the surface on what it will cost the employee.”

While many of the former hourly employees like Gunnell were represented by unions, the changes to health plans did not have to be approved or negotiated because only current employees are subject to collective bargaining, Martin said.

Dana Crittendon, president of IUE-CWA Local 761, which represents about 3,800 hourly workers at Louisville’s Appliance Park, said the unions that represent GE employees had no say in the change.

“It’s unfortunate that, legally, we are not obligated to negotiate for (retirees) and GE, now, holds the right to change retirees’ policy,” he said.

The Louisville union hall has fielded a lot of calls in the last week about the health plans, Crittendon said.

Union staff members will attend an information session planned in Louisville next month so they can learn about the new process and assist retirees in signing up for coverage, he said.

The exchange will also provide “licensed, non-commissioned experts” who will help the retirees decide which plan is best for them, according to GE’s letter.

But even if its employees aren’t paid on commission, Towers Watson has a financial incentive to enroll retirees in the plans. Insurers pay commissions to Towers Watson based on the number of enrollees who come through the exchange, the company said in its most recent annual report to investors.

Still, the employees who will help retirees can be “objective advocates” because they’re paid a salary, Towers Watson said in a statement.

“We have structured their compensation in this way to make sure they have no financial incentive to enroll retirees into one plan or one insurance company over another,” Towers Watson spokeswoman Melanie Meharchand said.

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